Number of Independent Agencies Dips a Bit: Future One Study

Despite continued robust agency mergers and acquisitions activity, the number of independent insurance agencies has remained stable at 36,000, a number slightly below the last tally of 36,500 in 2018.

That’s according to the 2020 Agency Universe Study from Future One, a collaboration of the Big “I” (Independent Insurance Agents & Brokers of America) and major independent agency companies.

Bob Rusbuldt, Big “I” president and CEO, said the survey reveals “good news for the independent agency system,” including the continued adaption of digital innovations by agents. Business conditions continued to improve in 2019, the survey shows, although at a slower rate than 2018.

Due to the pandemic, the study was halted in its traditional fielding time in March and re-started in September.

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The study also reveals areas agencies should focus on to better prepare for the future. “Women and people of color continue to be underrepresented as agency principals, and the Big ‘I’ is committed to continuing its outreach efforts to address this issue so agencies can serve all insurance consumers better,” said Rusbuldt.

Madelyn Flannagan, Big “I” vice president of agent development, education and research, said that while overall their agencies have fared well during the last year, agents do have concerns.

“In particular, as agencies express concern over emerging purchase channels threatening their consumer segment, the study revealed how crucial adaptation to social media and digital marketing strategies are key to agency success,” she said.

(According to another recent study, the J.D. Power 2020 U.S. Independent Agent Performance and Satisfaction Study, agents said that digital support could improve their satisfaction. Specific digital tools cited by agents focus on sales and product training and identification of cross-sell opportunities. Though these digital offerings are associated with high levels of agent satisfaction, they are used by fewer than 60% of agents.

Also, a survey last year of 700 agencies and brokerages by Applied Systems found that little more than half (51%) of independent insurance agencies and brokerages say they have some sort of digital strategy in place, with larger firms more likely than smaller to have one. While 51% said they have some sort of digital strategy, the average digital technology adoption score is 44%- nearly the same as in 2019. Agencies have moved into digital more in personal than commercial and they have continued to increase their use of mobile apps, according to the survey results.)

Selected findings from the 2020 Agency Universe Study include:

Business conditions remain favorable but growth slows. Business conditions continue to improve. The majority of agencies (70%) report increases in total revenue between 2018 and 2019, with an average increase of 20%. However, this is slightly lower than in 2018 when 76% reported an increase, with average increases of 25%. Agencies are slightly more likely to report increases in personal lines revenue (67%) than commercial lines (63%).

Emerging purchase channels remain a concern. The impact of emerging purchase channels remains a concern, with 35% of agencies believing personal lines direct purchase through the insurance company will have a significant impact on their agency over the next two years—and 27% believing the same issue will emerge with non-insurance website purchases. Approximately 1 in 4 express similar concerns about small commercial direct purchase or purchase through emerging online providers.

Inclusion continues to be a challenge. Women and people of color continue to be underrepresented in the independent agency universe. Forty-two percent of agency principals are women. Nearly 9 in 10 of agency principals are white. Larger agencies are especially likely to have male principal or senior managers. However, newer agencies are more likely to have at least one African American principal (12% versus 5% of established agencies).

Principal aging remains consistent. The aging of the independent agency universe is consistent with 2018 findings as the average age of agency principals is 55 years old, with 17% age 66 or older. Agencies may be starting to consider perpetuation planning. Nine in 10 have a perpetuation plan (on par with 2018), though it often centers around children and family. Four in 10 anticipate some ownership change in the next five years.

Social media and digital marketing strategies are key. All the top marketing strategies cited in 2020 are digital: social media and digital marketing (58%), creating and maintaining the agency website (49%), portal technology on the agency site (30%), search engine optimization (30%), and e-marketing activities (20%).

The study looks at statistics about independent agencies operating in the U.S., including their numbers, revenue base and sources, number of employees, ownership, mix of business, diversification of products, technology uses, non-insurance income sources and marketing methods.

The study also includes survey questions related to COVID-19’s impact on the independent agency channel, the results for which have been released separately.

Source: Big I